It's a necessary equilibrium condition for the market to all buy from the firm with the lower cost when the prices are the same. Otherwise the lower cost firm could shave its price down by an infinitely small fraction, break the indifference, and profit more from the gained sales than the loss from the lower price. Those strategies aren't an equilibrium either, however, because the lower cost form can always find the middle point between the original price and the shaved down one and profitably deviate. You only get equilibrium when the buyers purchase in that particular way.
Limit pricing? More like “Out-of-this-world quality this is!” Thanks for sharing more intriguing, and somewhat counterintuitive, material.
shouldn't firm 1 and 2 get half of the market each because both have the same price at c2?
It's a necessary equilibrium condition for the market to all buy from the firm with the lower cost when the prices are the same. Otherwise the lower cost firm could shave its price down by an infinitely small fraction, break the indifference, and profit more from the gained sales than the loss from the lower price.
Those strategies aren't an equilibrium either, however, because the lower cost form can always find the middle point between the original price and the shaved down one and profitably deviate. You only get equilibrium when the buyers purchase in that particular way.
Why wouldn't firm 1 charge a price lower than C2 so that it can have 100% of the market share?
Great dude, nice videos!!
This is why everything is made in Tryna.